Microsoft CRM : Miles To Go

Microsoft has begun shipping the much awaited Microsoft Dynamics CRM 3.0, the first major update to the CRM software Microsoft launched three years ago. The new version fills functionality gaps that had left Microsoft lagging behind its midmarket CRM rivals. Customers who bought Microsoft CRM soon after its launch have had a long, often frustrating wait for substantive improvements. The update adds an automation module for direct marketing and a service module to coordinate staff schedules. It also fixes glitches that had frustrated customers, such as the synchronization technology for remote users. Early demonstrations show that the new CRM software and Outlook share a nearly identical look and feel.
Microsoft has tweaked the software's licensing structure to encourage more partners to offer the customer relationship management (CRM) system as a hosted, subscription service. Microsoft's change looks more cosmetic : The architectural overhaul necessary to make Microsoft a true force in the on-demand software market won't happen until Dynamics CRM's next update, scheduled for release no sooner than 2007. By encouraging partners to offer subscription licensing options, Microsoft’s SME customers may not see any real effect with this launch. Microsoft’s software isn't designed with the multitenant architecture that allows providers to benefit from economies of scale with hosted applications. Each customer organization requires its own infrastructure. Until it offers multitenancy, Microsoft won't be a serious player in the on-demand applications market.
Interestingly, I spotted this from the microsoft site - "Business moves at light speed today, requiring that every company continuously reexamine direction, strategies, suppliers, partners—literally every variable and relationship that might lead to complacency. The intensified search for competitive advantage may mean that some of your best customers pick up and leave without you ever knowing that there was a problem". While Microsoft wants all of its divisions to adopt a services strategy. The company's lagging pace in the hosted CRM market has left it playing catch-up behind smaller, nimbler vendors.Microsoft should look at acquisitions as an option to offer full fledged on-demand offering. Microsoft is not seen as price competitive as it is built with a single tenant architecture. Every customer needs a separate installation of the system, on separate infrastructure. A multi-tenant architecture, supports a fundamentally different cost structure (lower) and gets lot more to look at on-demand more seriously.